Weekend Reading – Bank stocks, cryptocurrency advice, blowing $650-million, and more #moneystuff
Welcome to my latest Weekend Reading edition – where I share some of my favourite articles from the week that was across the personal finance and investing blogosphere.
Here was my article for this past week:
How to diversify my TFSA using ETFs (Exchange Traded Funds).
Enjoy the weekend folks and see you here next week for a dividend income update!
Steadyhand warned Canadians not to fall in love with just Canadian bank stocks.
Get Smarter About Money said when it comes to cryptocurrencies, “investors may be eager to get in on a new trend, but should be wary of the considerable risks that often accompany these investments.” Well said.
I got this request from a reader/follower:
I’ll answer that question next week!
A reader recently asked me:
Mark, when it comes to owning the simple, all-in-one Vanguard ETFs – why don’t you invest with these products?
My answer is: While low-cost funds and a certain level of diversification is very important, investors should also carefully consider their financial goals, risk tolerance and other considerations when making financial decisions. I believe we have done that. So, to that end, we invest in about 30 Canadian dividend paying stocks for growth and income, another 10 U.S. dividend paying stocks for the same reasons, and use low-cost ETFs in addition to that. At the end of the day, ETFs are financial products, some of them engineered to meet the needs of many investors but that doesn’t mean certain ETF products are always a slam dunk for you (or me).
Most Americans believe you need about $1.4 million in net worth to be “financially comfortable” yet more than 90% of Americans will never have that much wealth – or be financially comfortable then.
We know our enough number – do you?
Johnny Depp is apparently broke, after blowing some $650-million he made on his films over the years. Geez…
Cryptocurrency is a new and emerging way for anyone to earn an extra income. Check out more @ https://primemlmsoftware.com/top-10-cryptocurrency-mlm-companies/
I think crypto is here to stay and there’s money to be made if you invest long term. Nothing fancy, just invest 2-5% of your monthly income for 5 years at least, without taking anything out. And, most importantly, diversify: buy 30-50 different coins. A few of them will grow substantially and you’ll get a very good ROI. Too many people see this as a bubble or try to earn money short term. Investing long term is the smartest choice like with anything else from stocks, bonds, valuable metals.
Agreed – “Investing long term is the smartest choice like with anything else from stocks, bonds, valuable metals.” But I’m not convinced “crypto” is the next best thing since sliced bread 😉
For those concerned with the notion of Big Bank failure, remember, “too big to fail” only applies to the company itself; it’ll be the stock which fails, not the operation. Perfect example would be General Motors — the biggest auto company until 2008. Pre-failure stockholders saw their stocks go to $0; post-failure saw one of the largest IPOs with new stockholders enjoying a 4% dividend.
Same company, two very different stories.
Perhaps instead of selling off your individual financial stocks, you might think in probabilities of the above scenario actually happening. If it’s a large enough probability, think out further as to what scenario would benefit the most from any restructuring. Act ahead of the curve instead of being crushed by it (the article fails here — in typical Canadian fashion, the author prescribes a method of preservation, how to keep our money vs a plan of creation, how to make more money).
A good reminder about the “stock” vs. the “company”- there is a difference.
Oh No! I entered the Jun 30th prices and my holdings are down 3.42%. Guess “owning the market” is better than my 12 holdings, at least on paper. But my 6.66% additional income is real and not affected by daily price changes. Guess it’s a choice of which makes one feel better.
Here’s the 6 Month performance of the TSX, up 0.6%
How are you doing?
For us, our “Income” is up 6.66% as of June 30th. I don’t know about the price change as we don’t bother checking that.
“How are you doing?”
In all honesty I don’t have that figure. I’ve never tracked year over year income increases. I know it is up, I just don’t know by what percentage. I just realized I don’t have a total portfolio net worth increase amount either. When I set up the spreadsheet many moons ago, all we had was the RRSPs so that was all that was tracked. After reading your comment I went to check and realized that I had never updated the calculations to include the TFSAs. Now I’m not sure I care all that much. Funny how attitudes change.
“Now I’m not sure I care all that much. Funny how attitudes change.”
🙂 I think when you have enough money to meet your needs, you definitely care less. That’s a good thing!
I think the TSX will eventually “pop” in the coming years with oil approaching $100 again.
Looks like Canada has its own bank crisis long before 2008, and Canada has learned it’s lessons. From this article:
After the 1985 collapse of Northland Bank and Canadian Commercial Bank, Canadian regulations were further tightened (see Estey Commission). Partly because of this stronger regulatory environment, Canada’s banks were not in danger of insolvency in the crisis.
So during financial crisis, Canadian banks were OK. The six big banks are too big to fail but they did not fail during the financial crisis actually. Government spent lots of money to save the auto sector though.
I think diversification is definitely important. But maybe it’s not a fair comparison to think same thing happened to certain banks, e.g. citibank in US or that irish bank mentioned in the article, or Canadian Commercial Bank back in 80s will also happen to Canada’s big six in current time.
May, I think there were 6 big Irish banks involved not one. I can’t remember a lot about it but think the government (IMF??) saved the 2 biggies. Dividends were eliminated and values diminished greatly. We’re probably ok here but I think the point TB was making is don’t have all or a large percent in any one countries banking/financial industry – Canada. Bad things CAN happen and we are massively exposed to some very high home prices, big leverage and the largest debt per capita in the world, at a time of peaking markets/economies. YMMV
There is also some question as to how safe our banks were and what really happened in 08/09. Here’s a perspective:
The centre for policy alternatives had a paper out on this in 2012 and has a more harsh view.
re: The six big banks are too big to fail but they did not fail during the financial crisis actually. Government spent lots of money to save the auto sector though.
Government — Canadian & American — also spent lots of money to save the Canadian banks…which helped them to not collapse.
But what’s done is done.
The TSX is ready for a huge upswing. Nafta will get settled and Oil will go way past $100. Our banks – provide safe Divs and Growth – what more you want? It pays for Canadians (not Americans) to invest in Cnd stocks with the Div Tax credits. Plus – we need Cnd funds to pay our bills. But – just in case there is a pull back – what would you rather be in Pot Stocks or Utilities? I still say Utilities like EMA / FTS / CU are on sale. (load up). Bought lots of ENB at $40 and happy with the Line 3 approval. By 2020 they should X3 revenue from Line 3. Was my best buy this year and may still buy more.
I agree Mike. I can see oil getting to about $100 in another year or so. I own all those utilities and DRIPping all of them every quarter commission-free to own more shares over time. Last time I checked, people love their electricity and hydro!
Re: investing Canada
The issue I have is that there are a lot of countries in the world that do not have the stability and regulations that Canada has. Stock markets survive on perception. If investors perceive that there is corruption for example, they would likely shy away from it. It’s getting to the point where I’m not even sure if I trust the U.S. markets. It’s a conundrum.
It is true that “some” countries do not have the stability or regulations that Canada has, but IMO not “a lot” at least by market capitalization. However I’m not sure how easy it is to quantify all that. As Canadians I am sure we have a home bias. I think most developed countries that represent the vast majority of global capitalization – say top 10 list+, would be similar to our country. Vanguards VT global shows 86% in top 10 market cap countries. (53% is US alone) 42 countries shown, 8100 stocks. 90.6 in developed countries, 9.4% emerging mkts. I believe China would be the only country in top 10 that is almost certainly less regulated/stable/honest @3.2%.
Investing in equities (and perhaps even fixed income) even here has it’s share of issues that somehow happen. Nortel, Valeant etc
Yes, perception of trust is cornerstone of the markets. Markets have so far shaken off all this trade stuff. Who knows whether this trust will continue when repercussions surface.
Very true Lloyd. We are fortunate to have some very strict regulations in many sectors. That’s a barrier but also a stabilizer in many cases.
Tom Bradley’s article : i agree in diversification. I have 30% in bank stocks and the rest across dividend sectors – pipelines, telcos, reits, consumer staple, utilities. All canadian. Not changing anytime.
The bank stocks portfolio of tom’s friend’s dad was wiped out during the 2008. Did the bank stocks recover after that? Did the dad hold on to the stocks or sold them all in panic? Because all canadian bank stocks recovered from the 2008 crisis. Also what’s the financial state of Irish banks? Questions to be answered.
re: …all canadian bank stocks recovered from the 2008 crisis.
With the help of Canadian and American gov’t money, of course. Your bank might be diversified by geography, but if its business interests are are still heavily concentrated (i.e. loans), then it’s not all that diversified.
Agree with this. The Canadian housing market comes to mind.
And not all forays into international markets have been straight line winners for our banks.
I have to wonder why tom’s friend’s dad was wiped out during the 2008…he must have sold his bank stocks near record-lows. Too bad. That’s not necessarily a stock issue; because all equities were down 30% or so, that’s an investor behaviour issue. Thoughts?
Mark, congratulations on the high blog ranking.
I read an interesting piece a few days ago on cannabis in Canada. The top 4 companies in Canada now have a market cap equal to Fortis @ 19 billion $. Their current revenue is $150 million combined. Fortis is $6.5 Billion. Cash flow cannibis = $-78 million (that’s a minus!), Fortis $2.2 billion. Is this a bubble? LOL
Johnny Depp, I read something on his debt before (maybe it was here). Add him to the scrap heap like some other pro sports guys.
Tom Bradley, a good reminder and general guidelines for those of us interested in total return and diversity. And why no one industry is bullet proof.
Ya, those pot stocks will make big money eventually…just not sure who…the dust will settle on many of these companies.
I liked Tom’s article but what he forgot to mention is many Canadian banks invest in international lands. So, there is some (not tons mind you) built-in diversification. They are growing more and more. That said, owning only CDN banks is not ideal.
I think the point of the article on pot stocks is they’re wildly overvalued now – as if they’re already the scale of and making money like Fortis. EBITDA for them combined is -$150 million right now. Fortis is $2.9 billion. LOL Those left standing will make money sometime once sales get off the ground recreationally, but IMO for investors now it’s more of a speculative gamble and par for the course with trendy things. Reminds me somewhat of Tesla. Lots being made and lost.
That’s a fair point on CDN banks but it’s ~20-25% of their business, and Tom did reference them “operating a variety of businesses”, but that the profits are “primarily from the pockets of Canadians”. True…so far. That’s improving diversification wise but not reason enough now IMHO to ignore vulnerabilities mentioned, if one has heavy exposure in the numbers Tom mentioned. He was referring also to overall exposure- bonds, preferred, common stock etc., which many Canadians have. At some point the oligopoly is going to break or some other disrupters will happen, and the real estate /debt leverage issues in this country are concerning.
It’s crazy to assume those pot stocks are making “real” money like Fortis yet…but alas….a lot of folks are pumping those companies.
It will be interesting to see when the disruptions happen or what the triggers are. So far, the oligopoly has done rather well.
I think its crazy too but the market decides.
Agree the oligopoly has done well and I’m certainly not betting against them. Yes, interesting to watch indeed. The pace of change in business today is incredible due to technology.
Yes, technology is accelerating at a great rate…
re: The top 4 companies in Canada now have a market cap equal to Fortis @ 19 billion $…Is this a bubble? LOL
Nope, not at all. In BC, for many years now, the illegal cannabis industry (as opposed to the “legal” one) has been worth more than the combined natural resource industries of forestry, mining, fishing. If there is a bubble it’s from the stock market side of things, not the medicinal side.
The stock market point of view was what I wrote about re bubble so yes, unless you somehow believe these valuations are warranted.
Agree there is a large industry but how much will be harnessed into public company profitability and government coffers remains to be seen.
Buying cryptocash is NOT an investment of any type, no matter how you spin it. Beyond that, said “currencies” are merely the fruit of the (actually) valuable blockchain technology — most of which will rot, or already are rotten.
re: $1.4 million comfort zone
A bizarre and useless survey, for many a reason.
re: Johnny Depp
Guess that’s why they call it a “brokerage” account! Ha ha. But seriously, lots of people go broke every day; didn’t this get discussed here recently about the fixation on hyper-success/failure stories to drive the PF blogosphere, and how it’s merely a function of our ever-present lizard brain? Considering he hasn’t made a decent movie in a looong time (his prime was 20 years ago c.Dead Man), kinda surprised he even made that much money to begin with. Hollywood definitely has money to burn (e.g. Steven Seagal).
“re: $1.4 million comfort zone
A bizarre and useless survey, for many a reason.”
Yes, but I find these things interesting nonetheless. 🙂
As for Depp, very disturbed man from what I’ve read of him….
Tom Bradley article: Oh my god, I’m 25% Cdn banks and 100% Canadian equities!!! What should I do?? Sell a good portion of my portfolio and invest in a diversified group of ETF’s??
Of course I’d probably loose half my annual dividend income and are we sure those ETF’s would do as well as my current holdings, which I’ve owned for years & years? What about when/if we have a recession/crash or even a major correction?
Tough question, well not really, I’ll take my chances as is!
I know you will! Like I mentioned in another comment, Tom purposely left out the built-in diversification some banks provide by owning assets in other countries – to make his point. If I were you I wouldn’t sell regardless 😉